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Meeting Summary
1. Sally Keeble MP (Secretary, Africa
APPG) began by welcoming everyone to the meeting, and by welcoming
the opportunity to discuss the potential contribution of parliaments
in developing countries to poverty reduction, a crucial but complex
issue. She also began by highlighting the aim of this the third
meeting in the Parliaments and Development Meeting Series: to ask
what role parliaments can and should play in overseeing budgets
and in enhancing aid effectiveness.
2. Joachim Wehner gave the first presentation,
entitled ‘Legislative Financial Security (LFS) in Developing
Countries’. The presentation was based on a larger report
Joachim has recently completed which was commissioned by the UK
Department for International Development (DFID). LFS is a very important
issue in the context of budget support, for two main reasons:
• since DFID (and many other donors) are providing aid with
fewer conditions attached, there is a need to make sure that the
aid is used in a pro-poor way, and one way to do this is by strengthening
accountability mechanisms in recipient countries;
• as a way of reducing fiduciary risk, and to ensure that
aid is used in ways which are consistent with UK tax-payers’
interests.
3. The remainder of the presentation focused on two main issues,
namely a) what role do parliaments play in budgeting process; and
b) how can donors strengthen the role that they play. Under the
first issue, Joachim identified four stages of the budgeting process,
namely drafting, approval, execution and audit. The second and fourth
stages (approval and audit) are the most obvious ones in which parliaments
become involved. However, it was important to note that budgeting
is a process that goes beyond these two stages, and the challenge
is to ensure that parliaments have continuous oversight, i.e. through
all four stages.
4. Joachim then discussed some of the challenges facing parliaments
in poor countries. These include:
• parliaments find it hard to engage with strategic priority-setting
exercises, such as the Poverty Reduction Strategy (PRS) process
• they are often too weak politically to play a role in the
approval stage of the budgeting process, for example due to one-party
dominance;
• budgets are often in effect meaningless documents, due to
the large gap between approved and actual budgets;
• ineffective audit because of capacity constraints (e.g.
a lack of trained accountants);
• lack of transparency, and in particular restricted access
to budget information.
On the last point, a recent study shows a clear positive correlation
between estimates of budget transparency and GDP per capita –
evidence that access to budget information is much lower in poorer
countries.
5. Joachim then discussed the costs and benefits of greater legislative
involvement in the budgeting process. The benefits clearly come
from things like increased accountability, wider participation in
budgeting decisions, higher demand for fiscal information, and so
on. However, strong legislatures can also pose a fiscal risk if
they are too powerful: in particular, they may threaten fiscal discipline.
This is certainly a pervasive view in many of the International
Financial Institutions (IFIs). But this risk can be offset in various
ways, for example through fiscal rules which must be adhered to,
or through limited powers of amendment. Evidence for 76 countries
confirms that these sorts of policies work – for example,
countries in which parliaments are subject to limited powers of
amendment have higher levels of fiscal discipline.
6. Joachim then discussed four different models of financial scrutiny
of budgets, as follows:
• the status quo, with more information being provided to
parliaments, but with parliaments continuing to be side-lined in
decision-making;
• a budget-making legislature (e.g. US Congress), with an
elaborate committee structure;
• a legislature disengaged from in-depth scrutiny (or approval),
which focuses much more on ex-post performance assessment (e.g.
the UK parliament)
• the co-operative approach to budget making between legislature
and executive (e.g. Sweden).
7. In terms of organisations involved in strengthening parliamentary
scrutiny of the budget, a survey undertaken by Joachim with colleagues
showed that around 70 different organisations are active in this
area. Africa has been the main focus of this work, but various types
of activities are involved (e.g. budget analysis units, study trips,
and written guidelines). DFID’s largest project in this area
is in Vietnam – at around £3m over 5 years – which
is still small compared to other sorts of projects.
7. Finally, in terms of what donors can do to strengthen legislative
scrutiny, Joachim stressed the importance of:
• effective financial scrutiny being crucial for the success
of budget support;
• the importance of a continuous oversight process;
• the additional challenges for legislatures in poor countries;
• that support to financial scrutiny by legislatures is currently
low (relatively few organisations are involved, with relatively
small sums of money), implying that there are opportunities for
scaling up.
8. Martin Powell began by bringing attention to
the recent WDM papers entitled “Denying Democracy: How the
IMF and World Bank take power from poor people”, and “Building
scrutiny of the World Bank and International Monetary Fund: A toolkit
for legislators and those who work with them”.
9. Martin discussed the relationship that the IFIs have with the
executive in developing countries, and how this strongly affects
the relationship between parliaments and the executive. Conditionality
clearly affects the budget process, in that some of the basic decisions
are de-linked from the democratic decision-making process. For members
of the legislature in a typical developing country, it is extremely
difficult to get to grips with the workings of the IFIs and the
way in which they interact with the executive.
10. Martin then discussed the issue of conditionality in more detail,
defined as the use of financial incentives by donors to promote
the adoption of specific policies by recipient countries. One element
of this is selectivity, which involves allocating more aid to countries
in which existing policies are deemed to be more appropriate. This
is reflected most strongly in the use of Country Policy and Institutional
Assessment (CPIA) scores by the World Bank to determine the allocation
of concessional loans and grants among low-income countries. Between
1999 and 2003, 90% of such flows when to countries with above average
CPIA scores. It was certainly important for parliamentarians to
be aware of the workings of the CPIA scoring process, and what particular
score is attached to the country.
11. Beyond selectivity, the IFIs use conditionality in broader
and more pervasive ways. These provide barriers to parliamentarians
getting involved in monitoring the budget process. Legislatures
can’t often get hold of relevant documents and/or financial
agreements until they are finalised and signed.
12. It is very difficult for any single legislator to get involved
in the process of monitoring IFIs and their relationship with the
executive if they act alone. It clearly makes sense to link up and
also to link up with civil society organisations (CSOs). CSOs can
provide parliamentarians with much needed information and analysis,
as well as extra political influence. They can also provide continuity
in the scrutiny process in situations in which parliamentarians
change regularly following election. It is estimated for example
that up to 70% of MPs in Nigeria may change following the recent
elections.
13. Martin then provided a series of successful examples of parliamentarians
and CSOs working together. These were:
• the Mexico Equipo Pueblo initiative, which has been providing
independent analysis on the impact of structural adjustment programmes;
• the Malawi Parliamentary Committee on the IFIs, the aim
of which is to enhance legislative oversight and scruinty of IFIs
(and which can access bills before they are presented to parliament,
allowing more thorough investigation);
• the Parliamentary Front in Brazil, which is working with
the Brazilian Congress on issues related to IFIs, including working
towards an amendment to the Brailian Constitution to make the relationship
between exec and IFIs more open to legislative oversight.
• the Debt Caucus in Indonesia, which focuses on raising awareness
around loans, debts and borrowing strategy and how the government
is managing this.
14. Martin’s final point was that access to information is
crucial. In this context, local Freedom on Information (FoI) legislation
can play an important role. The IFIs have not traditionally been
keen on this, but there are examples where the World Bank has been
pressurised to adhere to local FoI law (e.g. in India). DFID could
and should also do more to make publicly available information on
the types of conditions it attaches to its aid operations, including
those which it does jointly with the IFIs.
15. Edward Leigh MP, the Chair of the UK’s
Public Accounts Committee, then gave a presentation on his practical
experience of holding the UK government to account. He said that
scrutiny of the budget in the UK is very weak, in comparison with
the case in the US for example. However, we do have a strong track
record of performance assessment, for example through the National
Audit Office. Most staff at the NAO work on value for money issues,
which is in turn fed through to the Public Accounts Committee. Importantly,
neither the NAO or the PAC is involved in policy, or in politics
– it is simply about tackling waste and efficiency. The director
of NAO is appointed for life by parliament, which is also important.
However, the PAC has no formal power – it can only put indirect
pressure on the government, through the media for example. The UK
experience with performance assessment can offer useful lessons
to developing countries seeking to raise legislative financial scrutiny.
He argued that performance assessment might be a more feasible option
than complicated US-style scrutiny of the budget.
Questions and discussion
16. Edward Leigh was asked a) what he thought about possible independent
evaluation of DFID, perhaps along the lines of OFSTED evaluation
of education or Her Majesty’s Inspectorate of Prisons. He
said he didn’t think these models would be good ones for DFID,
and DFID is already monitored closely by the Treasury and the National
Audit Office; he doubted therefore that another evaluation body
was needed. In his view, bilateral aid is very efficient and effective,
in comparison with say EC aid.
17. Edward Leigh was also asked about NAO/PAC value for money reports
on DFID, which are sometimes perceived as being too “gentle”
or insufficiently critical of DFID. In reply, he agreed that there
were very few instances of waste or inefficiency encountered at
DFID. However, this perhaps reflects the fact that it is much more
difficult for a UK-based body such as the NAO to monitor what DFID
is doing around the world. It was also confirmed that the NAO website
lists forthcoming evaluations of DFID it is carrying out.
18. Edward Leigh was also asked about the apparent inconsistency
between giving large amounts of aid to the executive on the one
hand, and trying to strengthen parliament on the other hand? In
other words, parliaments in most developing countries are not parliaments
in the real sense, i.e. representatives of the people who are paying
tax-payers. Shouldn’t it therefore be the job of DFID to monitor
how aid is spent? He expressed sympathy with this argument, although
it did depend on whether aid money was channelled through the government
or through alternative channels (e.g. NGOs).
19. On this issue, Martin argued that parliaments alone are clearly
not the solution; the importance of CSOs, the media and so on needs
to be recognised. It also needed to recognised that achieving the
structural changes to allow real accountability will be difficult,
and not all MPs will be in favour of this (e.g. those who feel they
may soon be in the executive).
20. Joachim was asked what DFID were planning to do with his Report.
He replied that it would feed into a multi-donor meeting in Brussels
next week on strengthening legislative financial scrutiny. Although
hard to say, he fully expected donors to take up the issue more;
to date there has been a lot of emphasis by donors on the role of
CSOs in strengthening accountability, but this role is more naturally
carried out by parliaments.
21. Joachim also agreed that it was a mistake to equate a strong
parliament with an oppositional parliament. Often the more antagonistic
parliaments do less effective monitoring.
22. A participant informed the audience about the AWEPA programme,
based in Amsterdam, the aim of which is to support parliaments in
Africa, and to keep Africa on the political agenda in Europe. It
is currently working on a Parliamentary ODA Oversight Programme,
jointly with NEPAD.
23. Martin expressed concern at the idea that parliaments might
undermine fiscal discipline. If this was the case, he argued that
a strong parliament might be more important than fiscal discipline.
Joachim argued that fiscal discipline was extremely important for
development and not to be undermined. The importance of budget scrutiny
lies in monitoring priorities and efficiency, rather than about
relaxing discipline.
24. A final point raised was, given that developing countries have
very limited resources for strengthening parliaments, what would
be the one thing they could do to strengthen their activities? Martin
replied that it would be to get donors to be truly transparent,
in terms of the information they make available to the public. Joachim
felt this had to be demand-led and would vary from country to country.
25. Finally, Sally Keeble thanked the speakers for a very stimulating
discussion.
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